Commonwealth Bank’s (CBA) first PERLS security was issued in 2001 at $200. They paid distributions at 1.85% above BBSW and the first exchange date was in April 2006. Its ASX code was “CPAPA”, a code which was re-used in 2009 by the PERLS 5 and the source of some confusion ever since.
In a surprise move, CBA has decided to issue a new series of ASX-listed hybrid securities, the tenth in the series. The bank does not have a hybrid coming due until December (CBAPC) and a broker who wished to remain unnamed described the announcement as “unexpected”. According to the broker “the market thought they were already adequately capitalised.”
In any case CBA plans to issue $750 million worth of PERLS 10 (ASX code: CBAPG), with the ability to raise more or less than this amount. The new securities will be perpetual, convertible, subordinated, unsecured notes and the proceeds will be used for general purposes.
As with all hybrid securities, the new notes have some features in common with equities and some features in common with debt securities. Distributions are at the discretion of directors but they are calculated according to a set formula with reference to the $100 face value of the securities. The notes will qualify as Additional Tier 1 (AT1) capital under the Basel III bank regulatory framework, which means they have the now-standard “trigger events” clauses which may lead to early conversion into ordinary shares or a write-off of the capital notes should APRA require it. In the event CBA is wound up, its hybrids would rank above ordinary shares but below ordinary debt securities and other liabilities.